Who's Buying Now?

It's another week, which means it's time to check the most interesting insider purchases.

After reading through numerous filings using insider tracking tool Form 4 Oracle, here are my top five this week.

The week's buying

Company

Closing Price 7/18/07

Total Value Purchased

52-Week Change

Capital Lease Funding (NYSE:LSE)

$10.14

$120,780

(4%)

dELiA*s (NASDAQ:DLIA)

$7.39

$172,376

2%

Mercantile Bank (NASDAQ:MBWM)

$20.33

$116,700

(46%)

Morgans Hotel Group (NASDAQ:MHGC)

$23.50

$140,944

57%

Santa Fe Energy  (NYSE:SFF)

$24.45

$1,814,619

(16%)

Sources: Fool.com, Yahoo! Finance, Form 4 Oracle, SEC filings.

Opportunity knocks, dELiA*s answers
My favorite insider buys occur when management bucks the consensus. The P/E is too high? Time to buy. Comps stuck in the muck? Back up the truck.

Today's contrarian buying comes to you courtesy of the group running things at teen girls clothier dELiA*s. On the whole, those following the stock in our Motley Fool CAPS investor-intelligence database aren't big fans:

Metric

dELiA*s

CAPS stars (5 max)

**

Total ratings

81

Bullish ratings

71

Bull ratio

87.7%

Bearish ratings

10

Bear ratio

12.3%

Bullish pitches

13

Bearish pitches

1

Note: Data current as of July 19, 2007.

Insiders aren't nearly as bearish. A week ago, board member Carter Evans, a debt banker and turnaround specialist, purchased 2,000 shares. Hedge fund MFL Investments, a 10% owner, bought 20,000 shares the same day. Chief Operating Officer Walter Killough joined the party on Friday by adding 1,000 shares of the stock to his portfolio.

Foolish colleague Jeremy MacNealy seems to think the buying is justified. Here's how he put the investment case in May, after covering what seemed to be, at best, a mediocre earnings report:

The squeeze on dELiA*s profitability is worrisome, but I still like the potential here. Retail revenues make up a minor part of the company's overall sales picture, offering plenty of opportunity for growth. Note also that dELiA*s is on track to grow its store base by 25% this year. When coupled with dELiA*s currently strong comps, I like the opportunity that trend presents.

Well put, Jeremy. The fact remains that dELiA*s is a somewhat inexperienced retailer that caters to a well-financed demographic: teenage girls. So long as girls like to shop, growth should follow.

Not that it will be easy; fashion is a fickle business. Fortunately, dELiA*s' strong balance sheet, which features more than $19 million in cash and little debt, provides plenty of room for error.

Or, as All-Star CAPS investor pencils2 puts it in his bullish pitch for the stock: "I think this company has a good future, and now that the stock is at a more reasonable valuation, I think it will outperform as a result." Color me convinced. Onto my watch list you go, dELiA*s.

Should you check into Morgans Hotel?
Sometimes, insider buys come back to haunt you. Morgans Hotel is that sort of buy. Why? Insiders were loading up in late November. Eight months later, the stock is up 63% -- easily beating the market over the same period.

But management still sees upside ahead. Or do they? CEO Edward Scheetz added 6,000 shares on Monday via a 10b5-1 trading plan.

For the uninitiated, a 10b5-1 plan allows executives to buy or sell stock on a fixed schedule, thereby avoiding the appearance of impropriety. That's usually smart strategy when selling. But when buying? I don't get it. Why check your brain at the door when you'll need it to value the stock you're purchasing?

So, much as I regret missing Morgans over the past eight months, I don't see a good reason to blindly follow a guy who, for now at least, is buying blindly. Call me when you're buying on the open market, Mr. Scheetz.

That's all for now. See you back here next week when we dig through more insider deals in search of the next home run stock.

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Fool contributor Tim Beyers, who is ranked 2,483 out of more than 60,000 participants in CAPS, didn't own stock in any of the companies mentioned in this article at the time of publication. Find Tim's portfolio here and his latest blog commentary here. The Motley Fool has a disclosure policy.


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